The stage seems set for regulators to get out of ruling on shareholder rights plans

This Friday, Jan. 8, the day that Suncor’s hostile $4.3-billion all-stock offer for Canadian Oil Sands is set to expire, may end up being a milestone.

If Suncor succeeds in getting support from holders of two thirds of COS shares – one of its conditions — that takeover may be the last in Canada involving a poison pill hearing.

The reason: The expectation that proposed changes in the workings of takeover bids will be implemented this year. Those changes are expected to get the regulators out of the ruling on shareholder rights plans because targets will be able to take more time to respond to offers.

“Significant proposed changes to the takeover bid regime were published in March 2015 that would result in a 120-day permitted bid regime,” said a recent report from Oslers. “The new takeover bid regime, if implemented as currently proposed, will likely result in the end of shareholders rights plan hearings by regulators in most cases,” added the report, noting that other measures including mandatory minimum tender requirements and a 10-day extension of a bid following the satisfaction of all conditions.

Richard Fridman, a partner at Davies, said the proposed 120-day takeover period, “is a change in the paradigm by Canadian standards. You don’t envision securities administrators are going to be that sympathetic to rights plans’ hearings.”

Fridman said the 120-day takeover period is longer than the time normally taken to complete a takeover. “The view seems to be that if you can’t do it in 120 days then sorry. You have had your chance and your time.”

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And the 120 day period provides more certainty than the current situation where Fridman argues regulators are always “balancing letting the shareholders have their say versus giving management the time they need to achieve the greatest value. You see that dynamic all the time,” he added.

Fridman sees one potential negative if the new takeover bid rules are implemented — an acquirer may walk away either because the target has more time, or because valuations of the target have changed. On that matter, prior to the recent Alberta Securities Commission (ASC) hearing, Suncor said it would walk if the regulator opted to give Canadian Oil Sands the full 120 day period in the target’s new shareholders rights plan. But Suncor changed its mind when the regulator ruled that COS would have about 90 days to find an alternative.

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Without the Suncor vs COS hearing — called because COS has introduced a new shareholder rights plan that ran for 120 days, a plan that hadn’t been put to shareholders — Suncor’s offer would have expired in early December.

At that hearing, the Alberta Securities Commission ruled it would “not be in the public interest to cease trade the new plan immediately.” The two-person panel then had to “identify and strive appropriately to balance the risks associated with (and the competing interests in) different potential outcomes, with a view to the public interest.”

The panel opted for the new plan to operate until “around the latter part of the week beginning on 21 December 2015,” before adding a period to take into account the Christmas holidays. The panel settled on Jan 4.